On a wild session where the Dow CLOSED 700 handles off its lows, and the Nasdaq bounced off the very round 7000 number registering a bullish counterattack candle, healthcare put in a mediocre performance finishing the 7th best of the 11 major S&P sectors. Some names like FATE were unable to extend winning streaks, with this one up 10 sessions in a row, but Tuesdays spinning top was some foreshadowing. To be balanced there was some M&A activity this week with TSRO being swallowed by GSK, jumping 58% on Monday. It was higher 10 of 11 days PRIOR to the announcement, with the lone down day on 11/28 recorded a bullish hammer off the very round 40 number. Talking about round numbers and hammers the XLV did just that today with a move off the very round 90 number. It was unable to break above the 96.16 cup base trigger we spoke about in our last Healthcare Report, but it may be resetting here. Bear in mind healthcare is still the best acting group of the major S&P sectors, so if this rally that began at lunchtime were to continue, this space should be a big beneficiary.
Big Four Bifurcation:
If you are as old as I am one remembers when the “big four” biotech names ruled the healthcare space. Sure they were volatile, but they garnered the most attention. Obviously there are not as relevant as they once were. Of course there will be some disparity in their YTD performance to be somewhat myopic, and the undisputed winner of the bunch is AMGN, which has risen more than 14% so far in 2018. The clear laggard is CELG which has fallen by more than 30% YTD. BIIB and GILD have hovered near the UNCH line, as BIIB is up just better than 1% and GILD is lower by nearly 3%. To me the most investable at the moment appears to be BIIB. It endured a 100 handle decline falling from 388 on 7/25 to 288 on 10/25, a sizable loss in such a short period of time. Some stabilization has begun as it filled in a gap on 10/25 from the 7/5 session, and notice that occurred at the very round 300 number. The stock quickly recouped its 200 day SMA and found support there with a bullish engulfing candle on 11/15, and another one on 11/23. Thursday it recorded a bullish piercing line candle, retesting both of the prior engulfing candles from 11/15 and 11/23. Enter with a buy stop, and as always a CLOSE, above the round 330 number and add to through a double bottom trigger of 358.51.
Keep in mind the longer a pattern forms and subsequently breaks out, the greater the probability of the move being successful. Below is a good illustration of GKOS, and how it was presented in our Healthcare Report from 10/31. A relatively deep WEEKLY cup base trigger of 52.58 was taken out the week ending 8/31 which flew higher by more than 55%. The breakout was retested the week ending 11/9, in that seventeen month base. Since then it has acted well and we know the best breakouts tend to work out right away. It nearly doubled the XLV 7% weekly gain last week, and is now offering yet another add on opportunity (remember leaders give you add on entries on the way UP). Not surprisingly the round number theory is coming into play with the 70 number trying to act as a double top. That scenario would be negated with a buy stop above a 71.01 pivot.